FHA Mortgage Insurance Requirements

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Securing a mortgage is a pivotal step towards homeownership, and for many, the Federal Housing Administration (FHA) loan stands as a valuable pathway. Aside from the benefits, it’s important to understand the role of FHA mortgage insurance within the lending process.

Let’s explore more about FHA mortgage insurance, including the types, costs, requirements and potential ways to remove it, so you can easily navigate your homebuying journey with an FHA loan.

What is FHA mortgage insurance?

FHA mortgage insurance serves as a safety net for lenders in the event that borrowers default on their FHA-backed mortgages.

Unlike conventional loans, where private mortgage insurance (PMI) is commonly required with a down payment below 20%, FHA mortgage insurance is mandatory for all FHA loans regardless of the size of the down payment.

How much is FHA mortgage insurance?

Your FHA mortgage insurance expense consists of two main components: the Upfront Mortgage Insurance Premium (UFMIP) and the Annual Mortgage Insurance Premium (MIP).

1. Upfront Mortage Insurance Premium (UFMIP)

The UFMIP is a one-time fee, typically 1.75% of the loan amount, that can be rolled into the loan and paid at the time of closing. This upfront premium serves to fund the FHA program and safeguards lenders against potential losses.

2. Annual Mortgage Insurance Premium (MIP)

The Annual Mortgage Insurance Premium (MIP) is an ongoing cost paid annually by borrowers. Calculated based on the loan-to-value (LTV) ratio, loan term, and loan amount, it is divided by 12 and included in monthly loan payments.

Unlike private mortgage insurance (PMI) on conventional loans, FHA MIP remains for the life of the loan in most cases.

How long is FHA mortgage insurance required?

Prior to 2013, MIP for FHA loans was cancelable once borrowers reached 22% equity in their homes. However, the rules changed, and now the duration of MIP payments depends on the size of the down payment.

  • For down payments of at least 10%, the annual MIP is required for the first 11 years.
  • For smaller down payments, the annual MIP is required for the entire life of the loan.

FHA MIP Rates for 2024

The annual MIP amount for FHA loans is determined by factors such as the loan-to-value (LTV) ratio, loan term, and loan amount. Generally, a higher LTV or loan amount will result in a higher annual MIP. Rates will also vary depending on the loan term.

FHA Mortgage Insurance Premium Charts

See the charts below to estimate your annual MIP expense based on your specific loan term, base loan amount, and LTV ratio.

FHA Loan Terms Up to 15 Years
Loan AmountLoan-to-Value RatioAnnual MIP %
≤ $726,200LTV ≤ 90%0.15%
LTV > 90%0.40%
> $726,200LTV ≤ 78%0.15%
78% < LTV ≤ 90%0.40%
LTV > 90%0.65%
FHA Loan Terms Over 15 Years
Loan AmountLoan-to-Value RatioAnnual MIP %
≤ $726,200LTV ≤ 90%0.50%
90% < LTV ≤ 95%0.55%
LTV > 95%0.55%
> $726,200LTV ≤ 90%0.70%
90% < LTV ≤ 95%0.70%
LTV > 95%0.75%

How to Calculate Your FHA Mortgage Insurance Premium

Let’s look at an example of how to calculate an FHA mortgage insurance premium. For this scenario, consider a loan amount of $250,000 with a 30-year term and an LTV ratio between 90% and 95%.

Calculate Upfront Mortgage Insurance Premium

The cost of UFMIP is equal to 1.75% of the base loan amount.

UFMIP = Loan amount * 1.75%

UFMIP = $250,000 x 0.0175

= $4,375*

*This amount is paid upfront at closing.

Calculate Annual Mortgage Insurance Premium

For a 30-year loan of less than $726,200 with an LTV ratio between 90% and 95%, the MIP expense is equal to 0.55% of the base loan amount.

Annual MIP = Loan amount x 0.55%

Annual MIP = $250,000 x 0.0055 = $1,375

Monthly MIP = Annual MIP / 12

Monthly MIP = $1,375 / 12 = $114.58*

*This amount is included in the monthly loan payment.

FHA Mortgage Insurance Removal

For loans originated between January 2001 and June 3, 2013, MIP is automatically canceled once you reach 22% home equity. If your loan originated after June 3, 2013, and the 10% down payment requirement isn’t met, MIP payments continue for the life of the loan.

However, refinancing to a conventional mortgage may allow some borrowers to remove these continuous MIP payments. To do so, borrowers must meet lender requirements, which generally include a 620+ credit score and at least 5%-25% equity in the home.

Dan Rafter

Dan Rafter has covered real estate, mortgage and personal-finance news for more than 15 years, writing for the Chicago Tribune, Washington Post, Consumers Digest and many others. A graduate of the University Illinois with a degree in journalism, he is editor of Midwest Real Estate News magazine and blogs on commercial real estate for that publication at rejblog.com, in addition to being a contributor for Refi.com.

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